Cashing in again with Coral

UK bookmaker Coral Eurobet looks set for a £800m (US$1.4bn) flotation, providing a profitable exit for private equity firm Charterhouse.

Charterhouse acquired Coral three years ago from Morgan Grenfell Private Equity for £860m. It has since conducted two refinancings, which are estimated to have returned £560m to the private equity group and its investors.

Charterhouse currently owns 84% of the group while the management, including chief executive Vaughan Ashdown and finance director Mick Mariscotti, holds the remaining 16%. A flotation could provide management with a £100m-plus windfall.

Lehman Brothers is understood to be advising Charterhouse on the flotation. The strong performance of the company’s larger competitor, William Hill, which was floated in 2002, would bode well for the move.

A flotation is thought to be management’s preferred option, but a sale has not been ruled out, as most private equity-backed floats are run implicitly as a dual-track process. The company’s £1.2bn debt is expected to be a substantial deterrent to any potential corporate or financial buyer, however.

Analysts believe that the flotation will provide a perfect platform for the already acquisitive company to make more acquisitions. Coral’s diverse nature and size means that it can conduct bolt-on acquisitions without attracting the attention of the competition authorities. This is not always the case with larger competitors such as William Hill and Ladbrokes.

As well as owning 1,260 betting shops, Coral has moved into the hugely popular area of online poker and fixed-odds betting terminals through the successful Eurobet website. If it does float its online poker business, it will join two other online poker groups that listed recently in the UK – PartyGaming and Empire Online.

Since its acquisition by Charterhouse three years ago, Coral has made almost £145m in operating profits on estimated sales of £5.4bn.